FEDERAL DATA FOR 2002
Federal adjusted gross income (AGI) fell for the second straight year, reflecting the weak economy and falling equity values (Table 1). In addition there were small changes in the personal exemption and standard deduction amounts for each taxpayer. Total income also fell for the first time since we have been keeping detailed data. Wages managed a small increase of 1.4%, and Taxable Pensions rose almost 7.2%. Capital Gains fell by almost 27%, which was a decrease in dollars of $491 million. Interest and dividends also had double digit declines.
The weak economy and significant tax decreases resulted in a fall in federal income tax revenues of over 9%, which are now only about 81% of what they were in 2000. Federal taxes are now only about 10.5% of AGI.
Table 2 reports various factors relating to itemized deductions. The fastest growing itemized deduction was medical expenses, and taxes were the slowest, and were basically stagnant. Interest payments continue to make up the largest itemized deduction, at nearly 38%, while taxes and charitable contributions follow around 24%. These top three deductions have been fairly stable over the last 10 years. The increase in the married standard dedution will probably decrease itemized deductions in 2003.